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CANADIAN  CLUB  of  NEW  YORK 


'.f-r  .-  t 


•T'J 


March  14,  1911 


Mr.  President 

and  Members  of  the  Canadian  Club : 

The  Interstate  Commerce  Commission 
handed  down,  nearly  three  weeks  ago,  its 
decisions  on  the  proposed  increases  in 
freight  rates.  I  think  three  things  may  be 
affirmed  about  these  decisions: 

First. — They  have  put  at  least  one 

« 

brake  upon  higher  costs  in  this  country. 

Second. — They  have  put  another 
brake  upon  voluntary  reductions  of 
rates  because,  under  the  new  law  and 
these  decisions,  the  burden  of  proof 
for  future  increases  or  restorations  is 
upon  the  railroads. 

Third. — The  present  law  amply  pro¬ 
tects  the  shippers  of  this  country 
against  extortionate  rates.  America 
has  already  the  lowest  rates  and  the 
highest  wages  in  the  world  and  appar¬ 
ently  is  to  retain  both. 

I  made  no  predictions  before  the  deci¬ 
sions  were  rendered ;  I  make  none  now  as 
to  their  ultimate  effect.  There  is  one 
bright  and  shining  sentence  in  them,  to  wit : 
''Our  railroad  management  should  have 
wide  latitude  for  experiment ;  it  should 
have  such  encouragement  as  will  attract 
the  imagination  of  both  the  engineer  and  the 
investor.’’  The  response  which  the  country 
will,  in  the  long  run,  give  to  this  sentiment 


F 


3 1566 


is  the  important  and  far-reaching  answer. 
The  crop  of  short-term  railroad  notes  now 
coming  out  would  indicate  that  the  coun¬ 
try’s  ^'imagination”  is  still  a  little  near¬ 
sighted,  but  it  may  get  over  that  and  we 
hope  it  will.  We  hope  the  Interstate  Com¬ 
merce  Commission  is  right.  Some  phases 
of  the  decisions  might  have  been  appealed 
to  the  newly  created  Interstate  Commerce 
Court,  but  the  railroads  have  accepted  the 
verdict  of  the  Commission  and  are  going 
ahead  to  do  the  best  they  can.  They  look 
forward,  not  backward. 

During  the  discussion  a  new  slogan — 
Ef'Ficiency — has  captured  the  country. 
Brandeis  is  the  man  of  the  hour.  His  fig¬ 
ures  look  large  to  most  of  us,  but  the  idea 
will  survive  and  should  be  cultivated  in  all 
lines  of  business.  The  total  expenditures 
last  year  by  the  railroads  of  the  United 
States  for  repairs  to  all  the  locomotives  and 
all  the  cars  and  for  engine  fuel  amounted  to 
about  $600,000,000.  It  is  claimed  that  we 
can  save  half  of  that,  or  $300,000,000  a 
year.  When  I  read  "$300,000,000”  I  thought 
of  the  story  of  the  Grant  family.  It  is  said 
to  be  one  of  the  oldest  families  of  Scotland, 
and  the  tradition  is  that  the  verse  in  the 
Bible  which  reads,  "There  were  giants  in 
those  days,”  is  a  misprint;  that  it  should 
read,  "There  were  Grants  in  those  days.”  I 
thought  perhaps  "$300,000,000”  was  a  mis¬ 
print  and  it  was  meant  to  read  $30,000,000, 


2 


but  we  will  not  quarrel  over  figures.  If 
even  $30,000,000  can  be  saved  it  is  certainly 
worth  saving.  I  read  in  the  Sun  one  day 
last  week  that  the  average  cost  of  a  cold  in 
the  head  is  $44.34 — and  I  have  read  some¬ 
where,  ‘'If  you  see  it  in  the  Sun,  it’s  so.” 
What  a  railroad  official  wants  to  know  is 
this :  If  his  company  can  reduce  the  cost 
of  the  cold  in  its  head  from  $44.34  to  $37.34^ 
zvho  will  get  the  seven  dollars? 

We  are  counselled  to  look  in,  not  out. 
My  suggestion  is  that  we  do  both.  First, 
let  us  look  in.  If  you  should  write  a  letter 
to  an  American  railroad  official,  his  corpo¬ 
ration  will  have  to  haul  a  ton  of  freight 
— two  thousand  pounds  of  average  freight 
— coal,  ore,  silks,  ostrich  feathers,  and 
everything — for  more  than  two  and  one-half 
miles  to  get  money  enough  to  buy  a  postage 
stamp  to  send  you  an  answer.  Out  of  that 
kind  of  service  the  corporation  must  pay 
its  employees,  buy  its  materials,  pay  its 
rents  and  taxes,  interest  on  its  debt,  and 
make  its  living.  Can  you  beat  it?  Can 
YOU  beat  it,  Mr.  Lawyer,  Mr.  Doctor,  Mr. 
Merchant,  Mr.  Banker,  Mr.  Farmer?  Is 
there  maximum  efficiency  in  the  practice 
of  law?  If  there  is,  why  are  so  many  con¬ 
tracts  and  wills  taken  into  court?  Why  is 
any  court  decision  ever  reversed?  Every 
lawsuit  that  is  won  is  also  lost.  If  there 
were  maximum  efficiency,  why  should  any 
suit  ever  be  lost?  How  could  so  many  ex- 


3 


pensive  hours  in  court  rooms  be  absolutely 
wasted?  If  there  were  maximum  efficiency 
in  banking,  would  there  ever  be  any  bank 
failures  like  those,  for  example,  we  are  now 
reading  about  from  day  to  day?  Would  any 
merchant  ever  fail?  Would  not  every 
farmer  get  a  blue  ribbon  ?  If  there  is  maxi¬ 
mum  efficiency  in  the  practice  of  medicine, 
why  are  there  so  many  undertakers?  If  it 
took  the  Creator  six  hundred  thousand  years 
to  make  a  bed  of  coal,  perhaps  the  perfect 
railroad  official  is  yet  to  be  born.  Perhaps 
other  perfect  people  will  be  born  at  the 
same  time.  You  see  I  am  not  despondent. 

Now,  let  us  look  out  a  little.  It  is  par¬ 
ticularly  appropriate  at  a  Canadian  Club 
dinner  that  we  look  at  Canada.  As  I  under¬ 
stand  it,  your  form  of  government  is  in  one 
respect  just  the  opposite  of  ours,  viz.,  your 
Dominion  Government  has  all  the  powers 
not  granted  to  the  Provinces,  while  our 
States  have  all  the  powers  not  ceded  to 
the  Federal  Government.  What  has  that 
to  do,  you  say,  with  railroads  ?  This : 
When  our  United  States  railroads  fall  ill 
from  their  own  indiscretions  or  otherwise, 
forty-seven  doctors  step  in — that  is,  forty- 
six  States  and  the  Federal  Government — 
whereas  under  your  form  of  government  a 
railroad  chartered  by  the  Dominion  is  reg¬ 
ulated  by  the  Federal  Government  only. 
See  the  enormous  loss  in  efficiency  and  the 
great  strain  on  the  patient  under  our 


4 


methods  as  compared  with  yours.  This 
winter  there  have  been  introduced  in  the 
State  legislatures  of  the  United  States  four 
hundred  and  sixty-nine  bills  affecting  the 
mere  operating  questions  of  railroads,  be¬ 
sides  scores  of  other  bills  affecting  railroads 
in  a  multitude  of  ways.  Of  the  four  hun¬ 
dred  and  sixty-nine  bills,  fifty-six  are  so- 
called  ''Full  Crew’'  bills,  each  of  which,  if 
enforced,  will  add  to  the  railroads’  cost  of 
living. 

Railroad  development  in  the  United 
States  is  dependent  not  only  upon  the  imag¬ 
ination  of  the  engineer  and  the  investor 
but  also  upon  the  legislation  of  the  Fed¬ 
eral  Government  and  forty-six  States. 
There  will  soon  be  forty-eight.  The  devel¬ 
opment  of  one  State  may  be  dependent 
upon  the  legislation  of  another  State  a 
thousand  miles  away. 

Let  us  look  out  again,  and  this  time 
across  the  water  to  England.  Railroads 
there  are  permitted  to  work  out  jomt  econ¬ 
omies.  Let  us  cross  the  Channel  and  look 
at  France.  That  Republic  is  districted  off 
and  wasteful  duplication  of  railroad  service 
is  absolutely  eliminated.  Each  company  has 
a  monopoly  in  its  district.  One  French  rail¬ 
road  corporation  pays  dividends  of  eighteen 
per  cent,  per  annum  on  its  stock ;  the  others 
pay  seven  per  cent,  or  more.  And  out  of 
their  revenues  an  amortization  or  sinking 
fund  is  also  paid  to  the  owners  under  which 


5 


the  Republic  will  become  the  proprietor  of 
the  railroads  about  the  middle  of  this  cen¬ 
tury. 

Reciprocity  with  Canada  has  caught  the 
popular  imagination.  We  have  no  tariff 
fences  between  our  States.  Minnesota  and 
Oregon  are  not  afraid  of  Dakota,  or  of 
Georgia,  or  of  Alabama.  Why  should  all 
of  us  together  be  afraid  of  Canada,  or  why 
should  Canada  be  afraid  of  us?  We  ab¬ 
sorb  in  ten  or  twelve  years  as  many  compet¬ 
itive  immigrants  as  the  whole  present  total 
of  your  population.  We  have  shown  the 
world  a  3,000-mile  boundary  line  without 
a  fortification  or  a  battleship.  We  shall 
undoubtedly  sometime  show  all  peoples  a 
3,000-mile  boundary  line  without  a  tariff 
fence.  We  shall  partake  of  your  bounty 
and  you  of  ours.  We  shall  sit  down 
at  one  hospitable  table — under  two  flags, 
of  course — but  as  one  family  on  ac¬ 
count  of  the  ties  of  consanguinity — the  ties 
of  our  common  ancestry.  The  table  will 
stretch  not  only  across  a  continent,  but 
also  from  the  Arctic  Circle  to  the  Gulf  of 
Mexico.  The  needs  of  a  nation,  including 
the  regulation  of  its  railroads,  are  bigger 
than  Fishhurst-by-the-Sea,  or  Lumberburg, 
or  Cornville.  Your  efficiency  will  sharpen 
our  efficiency.  If  any  of  your  miethods  as 
to  government,  or  banking,  or  labor  ques¬ 
tions,  or  railroads,  are  better  than  ours,  per¬ 
haps  we  will  be  wise  enough  to  borrow 


6 


some  of  them.  While  we  are  depending 
upon  the  imagination  of  the  investor  for 
railroad  development,  you  are  right  now 
engaged  in  what  is  practically  a  profit- 
sharing  arrangement  with  the  investors  in 
your  railroads.  If  the  option  to  take  out 
a  Federal  charter  for  a  railroad  is  good 
for  you,  perhaps  such  an  option  will  be 
good  for  us.  Maximum  efficiency  will 
require  us,  sooner  or  later,  to  eliminate  all 
burdens  on  interstate  commerce.  We  will 
learn  to  say,  ''The  United  States  is  a  Na¬ 
tion,’'  not  "The  United  States  are  a  Na¬ 
tion.”  The  Brandeis  idea  is  right.  What 
we  need  is  more  efficiency.  Let  every  man 
apply  it  in  the  activities  of  his  own  life, 
and  let  all  of  us  together  adopt  it  on  a 
wider  and  wider  scale, — and  incidentallv  use 
it  to  augment  international  trade.  The  more 
we  study  efficiency,  the  more  we  will  dis¬ 
cover  that  the  Interstate  Commerce  Law 
amply  protects  the  country  against  extor¬ 
tionate  rates  and  discriminations.  The  anti¬ 
trust  laws,  at  least  so  far  as  railroads  are 
concerned,  involve  an  appalling  waste  of 
energy.  We  do  not  need  both  laws  for  the 
railroads  any  more  than  a  State  needs  two 
Governors.  Maximum  efficiency  entitles 
the  people  to  have  the  commerce  of  this 
great  country  sent  over  the  lines  of  least  re¬ 
sistance.  Duplication  of  train  service, 
wasteful  car  supply,  unnecessary  hauls  of 
empty  cars,  duplication  of  capital,  and  all 


7 


that  sort  of  thing  ought  to  be  cut  out.  If  this 
could  be  done  I  have  no  doubt  that  one  hun¬ 
dred  million  dollars  a  year  could  be  saved 
in  the  operation  of  American  railroads  with 
which  to  tempt  “the  imagination  of  both  the 
engineer  and  the  investor.” 

In  efficiency,  American  railroads  have 
been  pioneers,  not  laggards.  All  things 
considered,  they  already  are  the  most  effi¬ 
cient  in  the  world,  and  if  “scientific  man¬ 
agement”  of  the  anti-trust  laws  could  be 
adopted  our  railroads  would  excite  the  ad¬ 
miration  of  even  our  own  countrymen.  Let 
us  drop  the  old  quotation:  “In  time  of 
peace  prepare  for  war,”  and  in  its  stead 
say  to  our  neighbors,  “In  time  of  friend¬ 
ship  let  us  prepare  for  more  friendship.” 
In  time  of  efficiency  prepare  for  more  effi¬ 
ciency.  More  abundance  for  the  many.  Let 
things  be  cheaper — and  men,  women,  and 
children  more  valuable.  The  welfare  of 
our  race,  and  therefore  the  welfare  of  all 
races,  is  bound  up  in  the  one  word.  Effi¬ 
ciency. 


8 


